Raymond O’ Rourke, Consumer Lawyer Visiting Professor University of Ulster, Northern Ireland The...

Raymond O’ Rourke, Consumer LawyerVisiting Professor University of Ulster, Northern Ireland

The transposition of Directive 1999/44/EU and Directive 2011/83/EU by the Law on Consumer Protection of 2010: review and assessment

Belgrade20-21 March 2013

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Introduction

EU Internal Market – wants to create situation where consumers can freely purchase good across borders & have similar consumer protections

Consumer Purchases – consist of numerous different types of Legal Contracts – ‘offer’ and ‘acceptance’ – issues of finance/payment – advertising/marketing – information available to consumers – guarantees – possibility of the exchange of goods soon after the contract is completed

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Safeguarding Consumers Interests

When regulating to protect Consumers Interests the EU has regulated two main aspects of the Contract.

1. Market Transparency – it has introduced laws demanding that considerable mandatory information & periods within which they can withdraw are available to the consumer before they purchase a product in order that they can made an ‘informed choice’ [Consumer Credit, Doorstop Selling & Distance Selling]

2. Substance of the Contract – it has introduced laws which cover many of the ‘terms’ contained within the Contract aiming at making it more favourable to the consumer [Unfair Contract Terms & Consumer Guarantees]

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Consumer Sales & Guarantees Directive 1999/44

Green Paper (1993) – very comprehensive discussion on so-called “legal” guarantees [conformity], commercial guarantees and after-sales services

Wanted to introduce ‘simple ground rule’ provisions on consumer information – it stated:“As a rule the consumer is unaware of the existence of the legal guarantee (i.e. conformity) and knows only the commercial guarantee. Thus when there is no commercial guarantee or when it cannot be invoked, the consumer believes he has no rights. Moreover, in many cases the consumer believes his rights are limited to the content of the commercial guarantee”

Eurobarometer (2009) – Sales Remedies – 15 M.S. – majority of consumers not aware of their rights – unaware of statutory periods in which remedies can be brought

European Consumer Summit, 18-19 March, Brussels – Workshop on Marketing of Guarantees – same issues highlighted – consumers not aware of rights

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As ever the Green Paper emphasises the importance of encouraging healthy competition based on good commercial practices = INTERNAL MARKET

Advocated a legal scheme for commercial guarantees that would be applicable throughout the EU – a so-called ‘European Guarantee’ – such a guarantee would mean the statutory application of standard guarantee conditions in all Member States for the same type of goods

Other issues discussed included: the notion the guarantee could confer additional benefits over an above the rights arising from the mandatory regime; the joint & several liability of vendors belonging to a selective distribution network established by the same manufacturer, advertisements as part of the guarantee & after-sales services.

FINAL DIRECTIVE – much less than that…… minimum harmonisation – Directive not a Regulation [Consumer Protection v. Food] – Contract & Sales Law well established in each Member State reluctance to change things

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The guiding notion of the directive is that goods purchased shall be in conformity with the contract of sale – elaborated in Preambles.

The legal protection of conformity is rendered compulsory by the law and is not dependent upon the contract.

The guarantee [warranty] instead depends on the willingness of one person, the guarantor, who assumes personal liability for certain defects

Article 1 – scope of application of Directive & definitions “consumer” “consumer goods” “seller” “producer”

“guarantee” “repair”

Water, gas & electricity, goods sold by hire purchase excludedMember States may exclude second-hand goods sold at public auctions

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Article 1 – definitions

consumer – any natural person who, in the contracts covered by the Directive, is acting for purposes not related to his trade, business or profession consumer goods - any tangible movable itemseller – any natural or legal person who, under a contract, sells consumer goods in the course of his trade, business or profession producer – shall mean the manufacturer or importer of consumer goods and any other person purporting to be a producer by placing his name, trade mark or distinctive sign on consumer goodsguarantee – any undertaking by a a seller or producer to the consumer, given without extra charge, to reimburse the price paid or to replace, repair or handle consumer goods in any way if they do not meet the specifications set out in the guarantee statement or in the relevant advertisingrepair – shall mean, in the event of lack of conformity, bringing consumer goods into conformity with the contract of sale

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Article 2 – conformity with the contract

“the seller must deliver to the consumer, goods which are in conformity with the contract of sale” – comply with descriptions; fit for purpose; show quality & performance normal in goods of the same type

Additional aspects

Article 2(3) – offers some reassurance to the seller – no lack of conformity, if at the time the contract was concluded, the consumer knew of the lack of conformity or could not reasonably be unaware of it. [Serbia demand to look at goods ??]

Article 2 (5) – supplements the conformity with the contract of sale – by deeming that any lack of conformity resulting from incorrect installation of the consumer goods shall be deemed to be equivalent to lack of conformity if installation forms part of the contract of sale and the goods were installed by the seller or under his responsibility.

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Article 3 – rights of consumer in the event of lack of conformity

If the goods do not conform – consumer shall be entitled to have the goods brought into conformity free of charge by repair or replacement [within a reasonable time] – unless this is impossible or disproportionate. C-65/09 Gerb. Weber GmbH v Jurgen Wittmer ; C- 87/09 Ingrid Putz v Medianess Electronics GmbH [Recital 15 – M.S. in national law may stipulate that reimbursement takes account of the use the consumer had of the goods] Case 404/06 Quelle AG

Have an appropriate reduction made in the price if consumer is not entitled to repair or replacement or seller hasn’t completed the remedy in time or has considerably inconvenienced the consumer

Have the contract rescinded with regard to the goods on same grounds

Repair ‘free of charge’ is judged using the principle of proportionality [e.g. unreasonable costs on seller: Art. 3(3)]

Art 3(6) – contract cannot be rescinded if the lack of conformity is minor - price reduction is then the norm

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Article 4 – right of redress for the seller

Provides the final seller, who is held liable for a lack of conformity by the consumer to pursue legal remedies against previous sellers in the contractual chain or the ultimate producer.

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Article 5 – Time Limits

Seller is liable where the lack of conformity becomes apparent within 2 years of the delivery of the goods. [Recital 18 - M.S. may suspend or interrupt this period in national law to facilitate amicable settlement]

Art 5(2) – Member States may stipulate that a consumer must inform the seller of the lack of conformity within 2 months from the moment he/she detected the lack of conformity

Art 5 (3) - If fault occurs within 6 months obligation placed on seller to prove it did not exist at the time of delivery. Additional protection for the consumer. It cannot be relied upon if it is incompatible with the nature of the goods or the nature of the lack of conformity. It falls upon the seller wishing to escape liability to prove the goods were in conformity at the time of delivery.

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Article 6 – establishes a special regime for commercial guarantees.

This covers situations where a promise is given to repair the product if it breaks within a certain period of time.

Def: ‘any undertaking by a seller or producer to the consumer, given without extra charge, to guarantee the price paid or to replace, repair or handle consumer goods in any way if they do not meet the specifications set out in the guarantee statement or in the relevant advertising’

These types of guarantees can induce consumers to purchase a product – but via Art. 6 (1) such guarantees shall be legally binding on the offeror or under the terms laid down in the contract. The guarantee must state the consumer has legal rights under applicable national law governing the sale of consumer goods & make clear those rights are not affected by the guarantee – must include info on making claims; duration & territorial scope and name/address of guarantor – M.S may stipulate a language requirement (Art 6(4))

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Article 7 – Waiver of Rights

Seeks to ensure the ill-informed consumer does not give away their consumer protection rights

Art. 7(1) – any contractual term which excludes or restricts a consumer’s rights before any lack of conformity is brought to the seller’s attention shall not be binding on the consumer

M.S have option in relation to second-hand goods – shorter timeframe for the seller’s liability Art. 5.(1) – 1 year

Art 7(2) – consumer is not deprived of the protection of Dir.1999/44 as a result of opting for the law of a non-Member State as the law applicable to the contract has a close connection with the territory of the Member States

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Article 8 – minimum harmonisation

Other rights which the consumer may invoke under national rules governing contractual or non-contractual liability are not set aside by this Directive.

Member States may adopt stricter rules or measures designed to ensure a higher level of consumer protection

Article 12 – Review Clause

Commission Communication COM (2007) 210

The case for introducing producer’s direct liability ??? – Belgium, France, Finland, Latvia, Lithuania, Portugal, Spain & Sweden have introduced various forms of producer’s direct liability – ‘status quo’

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Transposition in Member States

Minimum harmonisation – Directive also offers M.S choices in certain areas

Art. 1 (3) (exclusion of second-hand goods sold at public auction) was exercised only by 10 member states, with 17 not doing so.

Art. 5 (2) grants the option to require notification of a lack of conformity within 2 months, used by 17 member states, but not by 10.

The option in Art. 7(1) (reduced period for second-hand goods) was applied by 15 member states, whereas 12 chose not to use it.

14 member states have used the option in Art. 6(4) (language of guarantees).

Some member states have expressly adopted provisions based on Recital 18 (suspension of two-year period), e.g., Czech Republic, Hungary, Malta, Spain.

Some have also adopted measures following Recital 15 (reimbursement reduced to consumer to take account use they have had of the goods).

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Transposition in Member States

A number of member states have, given a consumer the free choice between the 4 remedies.

In some countries, there are longer time periods applicable (Finland, Ireland, United Kingdom)

A number of legislators took no steps to implement Art. 2(4) [seller not bound by public statements], which could also be explained on the basis of minimum harmonisation

Some of the new member states have retained their system of mandatory guarantees [Hungary, Slovenia], or have more extensive rules in place [Austria, Estonia, Finland, Latvia, Malta].

Producer’s direct liability [Belgium, France, Finland, Latvia, Lithuania, Portugal, Spain & Sweden]

Conclusion: Great variations in M.S – does it create inconsistencies e.g. some M.S. introduce a ‘negative presumption’ of conformity – the time at which conformity is to be assessed varies some relying on the passing of risk at the crucial time, others its linked with delivery – method of calculating price reduction is unclear – no provisions on cross-border enforcement…………………………… SERBIA ?????

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Conformity

Satisfactory quality

Someone buying a new pair of shoes would clearly not expect the soles to come away from the uppers after wearing them in normal conditions for a few days.

Particular Purpose

If a consumer was told that certain software generally used on Apple computers was compatible with a PC and it was not, it would not conform to contract. If the consumer made no mention of what PC he had and the software was bought on the assumption that it was compatible then the consumer would not be likely to have grounds for complaint.

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Conformity

Repair & Replacement

Having a one-year-old lawnmower with an inherent fault [needs new motor], the consumer can request that it be repaired rather than pursuing compensation to pay for a repair that he then has to arrange himself. Alternatively, he could request a replacement lawnmower of the same/similar specification.

Reasonable time & significant inconvenience

In the case of a wedding dress, there is clearly a crucial date in relation to which the number of days involved may become critical and that may be the main deciding factor. Repair might then not be feasible but a replacement might be appropriate.

In the case of an electric hedge trimmer the number of days may be less critical than with a wedding dress.

With a fridge, the lack of an alternative would weigh heavily in the analysis of this crucial household item but the provision of a loaned item might prove part of a successful remedy and so avoid “significant inconvenience”.

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Conformity

Disproportionate cost & partial/full refund

If a one-year-old table was only worth €50 and a repair would cost €75 then the seller could decline such a request and offer a replacement. If he had no such table in stock then he could refuse both repair and replacement & offer a partial refund

If a consumer has had constant problems with a product, from the time of the sale, to such an extent that he had never enjoyed any normal benefit from the product then the seller might be expected to offer him a full refund of his money

Sales Receipts [not covered by the Directive]

In providing redress to a consumer, a seller is entitled to satisfy himself that the product was purchased at his store and on the date claimed. A sales receipt is a good way of providing such proof (as is a well detailed credit card statement). Sales receipts are not a legal requirement in the Directive.

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National Sales Law v. Conformity

Conformity rules exist in conjunction with Member State’s national sales of goods laws – often issues of sales of goods mixed-up with those relating to conformity rules

Examples

You examined the goods and the fault was obvious

The seller pointed out the fault to you

You have changed your mind & found cheaper goods

You have damaged or altered the goods or failed to care for them in line with instructions

You have used the goods for some time & problem is due to wear & tear

Goods lasted for period of time they could be reasonably expected

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Canon Pixma Printer

Purchased January 2013

Warranty period = covers the hardware of the product for 1 year from date of purchase

Warranty service available in authorised Canon service centres – Irish address supplied

Costs of transportation to Canon centre to be paid by consumer

Warranty does not cover any maintenance, repairs or replacement of parts due to normal wear & tear – or any software

Warranty does not affect consumer’s statutory rights under applicable National Law

CD-installation – important issue via-a-vis Directive

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Samsung Galaxy 7” Tablet

Purchased March 2013

Warrants the product is free from defects in material design and workmanship for 24 months [6 months for batteries]

If within warranty period, under normal usage, the product proves defective it should be returned to the retailer where purchased. The liability of Samsung and its appointed maintenance company is limited to the cost of repair and/or replacement of the unit under warranty

Warranty only valid with proof of purchase [sales receipt etc]

Samsung’s obligations are to the repair of the defective part and at its discretion replacement

Warranty not applicable if used with accessories not approved by Samsung or failure of the product from incorrect installation or use not in compliance with product manual instructions

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Civil, administrative & penal remedies

Ireland

Consumer contracts are protected by the Sale of Goods & Supply of Services Act 1980. Under this Act the purchaser of goods has a number of rights - the main ones are

Goods must be of merchantable quality – goods should be of reasonable quality taking into account what they are meant to do, their durability and their price

Goods must be fit for their purpose – they must do what they are reasonably expected to do Goods must be as described - the buyer must not be mislead into buying something by the description of goods or services

given orally by a salesperson or an advertisement.

When you buy goods in a sale you have the same rights as when you pay full price for the goods.

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Civil, administrative & penal remediesIreland

European Communities (Certain Aspects of the Sale of Consumer Goods and Associated Guarantees) Regulations 2003 – transpose Directive 1999/44 – give consumer additional protections & rights

If you made your purchase using your debit or credit card you may be able to get your bank or credit card company to reverse the transaction. This is called a chargeback

If repair or replacement are not offered by the seller & you are not happy with the seller’s response – the option is available to seek damages in the Small Claims Court - inexpensive, fast way for consumers to obtain redress – claim cannot exceed €2,000.

Consumer completes Form [cost €25] – seller has 15 days to reply to Form when received from the Court – reply sent to consumer and the Court tries to settle the case at this stage. If no settlement it is set down for court hearing. Not normal court hearing – informal, you can have legal representation but its not compulsory – mediation-type proceedings – can appeal the decision to the Circuit Court

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Civil, administrative & penal remediesEuropean Union

Alternative Dispute Resolution (ADR) and Online Dispute Resolution (ODR)Procedures – new proposals adopted in March 2013

Every M.S. must have ADR procedures in place for all consumer contractual disputes by March 2015 – they must be ‘fair, independent & transparent’

New obligation - all traders must inform consumers about ADR when a dispute cannot be settled directly between consumer and trader

ODR – single entry point on web – complete your details of your dispute in your own language – ODR notify the trader and together consumer & trader will agree on which ADR entity to utilise. Disputes must be solved within 90 days

Why necessary ????? – in 2010 – 1 in 5 (20%) consumers in EU encountered problem buying goods and services, especially over the internet – only a very % of consumers sought and secured effective redress

Project will look at this issue – study & seminar – amendments to LCP ??

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Directive 2011/83 – Sales Contracts provisions

Preamble 13 – M.S can maintain or introduce national provisions on issues not specifically addressed in the Directive, such as additional rules concerning sales contracts, including in relation to the delivery of goods of provision of information during the existence of the contract

Preamble 18 – the Directive will not affect national law in the area of contract law for contract law aspects aspects that are not regulated by the Directive – the Directive should not affect issues in relation to a lack of consent; general contractual legal remedies; rules on excessive prices or unethical legal transactions

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Article 2 – definitions

Goods - means any tangible movable items

Sales contract – means any contract which the trader transfers or undertakes to transfer the ownership of goods to the consumer and the consumer undertakes to pay the price thereof

Commercial guarantee – means any undertaking by the trader or producer (the guarantor) to the consumer, in addition to his legal obligation relating to the guarantee of conformity, to reimburse the price paid or to replace, repair or service goods in any way if they do not meet the specifications or any other requirements not related to conformity set out in the guarantee statement or in the relevant advertising available at the time of, or before the conclusion of the contract

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Article 3

Directive does not apply to contracts:

For social services For healthcare For gambling For financial services For property sales For construction of new buildings For package holidays For timeshare For foodstuffs For passenger transport services For telecoms

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Article 5 – pre-Contractual information

Idea is that if the consumer is provided with clear & comprehensive information in the pre-contractual phase then they will make a more informed choice – but this doesn’t affect existing National Contract Law & issues like ‘offer’ and ‘acceptance’

1. The main characteristics of the goods

2. Information on the seller – name, address, tel no etc

3. Total price of goods inclusive of taxes, plus all additional charges i.e. delivery costs, postage costs

4. The arrangements for payment and delivery times if necessary

5. A reminder of the conformity of goods with the contract obligation on the part of the seller. The conditions of after-sales service and any commercial guarantees where applicable

6. Duration of the contract

7. When selling digital content seller will be required to inform consumers of the functionalities of such content, the protection measure available to them and any relevant interoperability with hardware or software

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Article 18 – Delivery

Preamble 51 & 52

The seller shall deliver the goods to the consumer (third party) by transferring the physical possession or control of the goods to the goods without undue delay – no later than 30 days from the conclusion of the contract [unless parties agreed otherwise]

If the seller fails to deliver the goods within 30 days [or agreed time] – the consumer shall ask him to deliver the goods within an additional period of time, appropriate to the circumstances. If the seller fails again to deliver the goods – the consumer is entitled to terminate the contract

If the contract is terminated, the seller is obliged to immediately reimburse the consumer all monies paid under the contract

Besides termination of the contract – this Directive does not extinguish any other remedies available to the consumer under National Laws for the non-delivery of goods & termination of a contract.

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Directive 2011/83 – Sales Contracts provisionsArticle 20 – Passing of the Risk

Preamble 55

In contracts where the seller delivers goods to the consumer the risk of loss or damage to the goods passes when the consumer or a third party indicated by the consumer or a carrier [e.g. DHL, Post Office] who was not commissioned by the seller to deliver the goods, has acquired possession of the goods

French Law – the contract in and of itself transfers ownership from one party to another – no need for physical transfer

German Law – the transfer of ownership [real property] takes place when registered

Idea of the Directive is to give the consumer a kind of ‘protective shield’ they being the weaker party

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Raymond O’ Rourke, Consumer Lawyer Visiting Professor University of Ulster, Northern Ireland The...

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